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November 14, 2022
2022-6099

US IRS 2022–2023 Priority Guidance Plan includes transfer pricing projects similar to last year

  • The United States (US) Internal Revenue Service (IRS) and Treasury continue to develop guidance on certain transfer pricing provisions.

  • Taxpayers should follow these developments when evaluating advanced pricing agreements and other transfer pricing issues.

In its 2022–2023 Priority Guidance Plan, the IRS and Treasury listed the projects to which the IRS and Treasury will allocate resources for plan year 1 July 2022, through 30 June 2023. This year's plan includes transfer pricing-related projects similar to those listed in the 2021-2022 guidance plan (see EY Global Tax Alert, US IRS and Treasury release 2021-2022 Priority Guidance Plan with new transfer pricing projects, dated 29 September 2021).

The IRS and Treasury again included the transfer pricing project, which would clarify the effects of group membership on arm's-length pricing (specifically for financial transactions) under the Internal Revenue Code1 Section 482 regulations. Additionally, this year's guidance plan again includes updating (1) Revenue Procedure 2015-40, which provides procedures for requesting and obtaining assistance from the US competent authority under US tax treaties; and (2) Revenue Procedure 2015-41, which provides procedures for requesting and obtaining Advance Pricing Agreements.

Like the 2021–2022 plan, the guidance plan listed regulations under Sections 367 and 482 under the transfer pricing section. The project, which appears to combine two projects from the 2021–2022 Priority Guidance Plan, includes (1) regulations addressing the changes to Sections 367(d) and 482 "on aggregation, realistic alternatives, and the definition of intangible property"; and (2) regulations under 482 clarifying certain aspects of the arm's-length standard, including periodic adjustments.

Unlike the 2021–2022 plan, this year's guidance plan does not include parts of the project on Section 482 regulations concerning "coordination of the best method rule with guidance on specified methods for different categories of transactions" or "discretion to determine the allocation of risk based on facts and circumstances of transactions and arrangements.”

The guidance plan also includes, as it did last year, the inbound transfer of intangible property subject to Section 367(d). If a US person transfers any intangible property to a foreign corporation in an exchange under Sections 351 or 361, the outbound transfer is generally governed by Section 367(d).

Implications

The inclusion of several transfer pricing items on the priority guidance plan, along with increased IRS funding, suggests forward movement of potential enforcement efforts in transfer pricing. In addition, any modifications to Revenue Procedures 2015-40 and 2015-41 will give taxpayers more guidance on the criteria governing acceptance into the Advance Pricing and Mutual Agreement Program and how to structure requests for advance pricing agreements and US competent authority assistance.

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For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (United States), National Tax Department, International Tax and Transactions Services, Transfer Pricing

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Endnotes

  1. All “Section” references are to the Internal Revenue Code of 1986, and the regulations promulgated thereunder.
 
 

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